Cephalon Inc. / Mepha AG

Branded Generic Pharmaceuticals (Multi-Therapeutic, Emerging Markets)

Disease Overview

This deal is not single-indication; Mepha was a Swiss-based branded and unbranded generics company spanning anti-infectives, cardiovascular, CNS, pain, and respiratory therapeutic areas across more than 50 countries with particular strength in Switzerland, Eastern Europe, Africa and the Middle East. Branded generics are used in markets where physicians and patients prefer named-manufacturer generics, generating higher margins than US-style commodity generics.

Competitive Landscape

The 2010 emerging-market branded generics landscape was led by Teva, Sandoz, Mylan, Stada, Hikma, and rising Indian players Sun, Dr. Reddy's, Lupin and Cipla. In Switzerland specifically, Mepha was the #1 generics company by share. The Cephalon-Mepha deal was unusual: Cephalon was a US-focused branded specialty pharma (Provigil/Nuvigil, Treanda, Fentora) with no prior emerging-markets footprint, and the deal doubled its international revenue base overnight while diversifying away from looming Provigil patent expiry in 2012. Analyst Michael Nawrath of Zürcher Kantonalbank described the deal as 'a purchase of top-line growth with high margins,' while Oppenheimer's Bret Holley called it 'an add-on to Cephalon's core business, not a philosophy shift'. Strategically the deal mattered because it gave Cephalon a launch platform for its branded specialty products into Eastern Europe and Africa, and it brought ~120 generic products into the portfolio. The transaction was rendered moot 13 months later when Teva acquired Cephalon for $6.8B in May 2011, folding Mepha into Teva's already-dominant global generics franchise.